Case Title | Airbus Group India Pvt Ltd |
Court | Karnataka AAAR |
Honorable Judges | Member Ranjana Jha & Member Shikha C |
Citation | 2021 (11) GSTPanacea 70 HC Karnataka KAR/AAAR/APPEAL-09/2021-22 |
Judgement Date | 09-November-2021 |
Council for Petitioner | G.Shivadas |
Council for Respondent | NA |
Section | Section 100 of CGST Act, Section 2 & 16 of IGST Act |
In Favour of | In Favour of Revenue |
The Karnataka Bench of Member Ranjana Jha & Member Shikha C has held that thus, one of the important requirements for supply of any service to be treated as ‘export of service’ is that the place of supply of service is outside India. When the place of supply is in India, it does not satisfy one of the conditions for export of service, that the place of supply should be outside India. Therefore, bench hold that the intermediary services provided by the Appellant to Airbus France, do not qualify as export of service.
FACTS OF THE CASE
The Appellant is a Private Limited Company and operating as a subsidiary of Airbus Invest SAS, France. The Airbus Group (of which the Appellant is a part) generally procures parts, components or services from both domestic and international markets which are required for manufacturing and assembly of aerospace products like aircrafts, helicopters, etc.
The Airbus Group has a specialized global sourcing team which is responsible for sourcing of relevant products from various international market. Airbus France has entered into an “Intra-Group Services Agreement” with effect from Pt April 2020 with the Appellant in terms of which the Appellant is required to perform two functions; i.e (i) Procurement Operations – rendering of various technical advisory and business support services in relation to supplier development activities; and (ii) Procurement Transformation & Central Services – procurement ethics & compliance, procurement process and key projects management, strategy, business intelligence and digital procurement, flying part procurement and general procurement.
For the above said services, the Appellant would be remunerated with a service fee computed on a ‘cost plus mark-up’ basis. The Agreement specifically restricts the Appellant to decide or select any supplier and agree upon the terms and conditions of the supply and the said decisions are the prerogative of Airbus France. The Appellant is also not responsible for issuance of purchase order or payment for the supply made by the vendor.
In order to obtain a ruling on the classification of the service provided by them, the Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question:
Whether the activities carried out by the Appellant in India would constitute a supply of “Other Support Services”, falling under Heading 9985 or as “Intermediary Service” classifiable under Heading 9961/9962 or any other classification of services as specified under GST laws?
(b) Whether the services rendered by the Appellant would not be liable to GST, owing to the reason that such services may qualify as “export of services” in terms of clause 6 of Section 2 of the IGST Act, 2017 and consequently, be construed as a ‘zero-rated supply’ in terms of Section 16 of the IGST Act?
- The AAR vide its order KAR ADRG No 31/2021 dated 1st July 2021 held as under:
“The activities carried out in India by the Applicant would constitute a supply as “Intermediary services” classifiable under SAC 998599.
The services rendered by the Applicant do not qualify as ‘export of services’ in terms of sub-section 2 of Section 6 of the IGST 2017 and consequently, are exigible to GST at the rate of 18% in terms of clause (iii) of entry no. 23 of Notification No. 11/2017-Central Tax (R) dated 28.06.2017.”
Aggrieved by the ruling given by the AAR, the Appellant has filed this appeal
COURT HELD
Considering the facts as recorded, held that thus, one of the important requirements for supply of any service to be treated as ‘export of service’ is that the place of supply of service is outside India.
by virtue of Section 13 (8) (b) of the IGST Act, it automatically flows that the place of supply of the intermediary service provided by the Appellant to Airbus France, is in India. When the place of supply is in India, it does not satisfy one of the conditions for export of service, that the place of supply should be outside India. Therefore, bench hold that the intermediary services provided by the Appellant to Airbus France, do not qualify as export of service.
Bench uphold the order No. KAR ADRG 31/2021 dated 01/07/2021 passed by the Advance Ruling Authority and the appeal filed by the Appellant M/s. Airbus Group India Private Limited, stands dismissed on all accounts.
ANALYSIS OF THE JUDGEMENT
The provisions for determination of place of supply of services where the location of the supplier or the location of the recipient of services is outside India are contained in Section 13 of the IGST Act, 2017. Section 13(8)(b) of the said Act stipulates that the place of supply in the case of intermediary services will be the location of the supplier of service.
In this case, the activity of the Appellant who is the supplier of intermediary service i.e collection of information of parties in India, analysis of potential suppliers and skill development of existing suppliers, are all very much done in India, which is the location of the supplier of intermediary service.
Therefore, by virtue of Section 13 (8) (b) of the IGST Act, it automatically flows that the place of supply of the intermediary service provided by the Appellant to Airbus France, is in India. When the place of supply is in India, it does not satisfy one of the conditions for export of service, that the place of supply should be outside India. Therefore, bench hold that the intermediary services provided by the Appellant to Airbus France, do not qualify as export of service.
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